European politics

Blaming free markets for everything

EARLIER this month, my eye was caught by a short summary of a Dutch-language editorial in the daily newspaper NRC Handelsblad, which seemed to trace a link between privatisation policies made popular by Ronald Reagan, and the rise of populist Dutch politicians like Geert Wilders. Given that this was only a summary, I wrote at the time, I would not put my kicking boots on, but would wait for an English translation to appear on Handelsblad's excellent international website.

Well, the piece is now up in English, and I fear the kicking boots are on. In a truly shoddy piece of work, the writer Marc Chavannes manages to conflate the private provision of public services with a long catalogue of ills, including voter angst about borders made more porous by globalisation, and a case in which an Amsterdam taxi driver beat someone to death.

"...for the past 10 to 15 years, government has asserted that many a public task could best be left to the free market. In a nutshell: the government lost its faith in government as a place to solve public problems and perform formerly public tasks. No public service remained untouched

The Netherlands was late in professing its devotion to Reaganism and Thatcherism. But when it finally did embrace the free market business model in the nineties, it never let go. Public transportation, energy supply, public housing, culture, health care, the way the legal system and education are managed, even the state itself - everything had to be given over to market principles. No public service remained untouched in this giant governance experiment while, at the same time, the quality of education was eroded by endless innovations and cuts.

Significantly, nobody has seriously examined whether any of the promised successes were delivered. But despite a lack of research, the failures are there for all to see. The death of a man who was beaten by an unregulated ('free') Amsterdam taxi driver is a fatal example"

Um, where do I start? The core of Mr Chavannes's piece, if I am reading it right, is the thought that privatisation involves an abdication of responsibility by governments. And because governments are, or should be, democratically answerable to voters, society becomes less and less democratic when public services are outsourced to private enterprise.

This is nonsense on stilts. Private and public enterprises operate within societies based on the rule of law, and great thickets of regulation. Public and private enterprises can be badly regulated, or well regulated. Mr Chavannes blames deregulation for allowing a murderous driver to be allowed to drive an Amsterdam taxi. No, poor supervision or bad regulation is the problem. There is nothing to stop a government from imposing all manner of safety checks on privatised companies. Just think of Europe's largest commercial airlines: private firms, whose employees rarely if ever beat passengers to death.

Ah, but supervision is not enough, says Mr Chavannes, if it is provided within a market-based system. Only control by politicians can provide accountability.

"The responsibility for all the outsourced services was shifted to a newly-created cottage industry of supervisors. Politicians are no longer at the wheel, which leaves some indifferent and others confounded by their lack of authority. The market supremacy in public administration - literally and mentally - has led to a privatisation of politics. The distinction between public and private duties has been deliberately blurred and it is an impossible task to try and find out who can be held accountable for what."

I have never lived in the Netherlands, as it happens. Perhaps the country was infinitely better run before any services were privatised. But I am (just) old enough to remember life in 1970s Britain, and, to pick just one example, the fun of trying to buy a new gas cooker from the Gas Board, the only licensed supplier. Oh, the joy of waiting weeks for a surly man with a clip board to deliver the machine. Ah, the fond memories of plying the same man from the Gas Board with endless cups of tea until he stirred himself to fit it. Not to mention the fun of knowing that calling the ordinary Gas Board telephone number would never elicit a reply if the thing went wrong: only a call to the number reserved for gas leaks would stand a chance of being answered. You see, Mr Chavannes presents state services in the abstract as accountable: I remember them as monopolies with astonishingly bad and high-handed service. You could offer the same anecdotes about nationalised telephone monopolies, nationalised railways, nationalised airlines (remember British Airways before privatisation, and the camp commandant style stewardesses, barking orders at cringing passengers?) True, some countries are better at public services than others. France, for instance, is better than Britain at public services.

I remember vividly as a child the thrill of descending the hill to the ferry port at Dover, and straining for the first sight of the Sealink ferry we were about to take to France. The hope was always to see a ferry run by the French railway company, SNCF, rather than the heart-sinking sight of a British Rail Sealink ferry, with its brown food, filthy interior and morose crew.

Privatisation for British people of my generation meant liberation from monopolies, and thus more power as an ordinary citizen. Private provision of services is not perfect, but give me choice any day, over the theoretical comfort that a state employee is in charge of delivering my cooker.

Readers' comments

I think 'populist' is better characterization than the earlier 'European far-right populist'. And Handelsblad article tries to sum up the 'European Union-wide problem' as anti-immigrant populists - not right.

True - PVV, Vlaams Belang and maybe Dansk Folkeparti could be rated as broadly 'right' on economy, yet BNP is 'socialist' as hell IMO. 'True Finns', while sometimes talked about as 'third way', sound left economically, and FPÖ is all over the place (if centrist, moderate or other complimentary label is not to be used).

There are more straightforward explanations for the raise of 'anti-immigrant' parties than corrupting influences of St. Ron or the markets. The ones those parties themselves appeal to, for example? Inventing other explanations is a way of refusing to acknowledge their claims, I guess.

What I did not get was - how exactly 'democratic deficit' manifests itself? Is it in the very existence and (modest) electoral success of Geert Wilder's party? Even if 'anti-immigrant' is a fair label, is being one per se 'democratically deficient'?

Agreed, but culture can be changed. And in fact, does change, all the time. The transformation of the UK from a near-Soviet-style economy into one of the most market-based in Europe in a matter of half a decade is proof positive of that. From a cultural standpoint, nothing is set in stone. Thankfully.

I was also commenting on the fairly terminal phrasing of Charlemagne's point about one country being forever impeded from delivering good services, compared to its neighbour being destined to never fail. :-)

@Matthieu,

Quote: "a Frenchman with strongly (in French standard) liberal orientation, living in an Anglo-Saxon country (Australia)" Join the party!! :-) I never realised you lived in Oz, too. Being beaten over the head in France for being "libéral", and on "Anglo" forums for being a left-wing nutcase. Ah, the joys and pleasures of trying to find a happy middle.

The way Charlemagne puts it, one would think that British people are inherently bad at running public services, while French people would be genetically predisposed to be efficient public servants. In no uncertain terms, I think that's complete bollocks.

For two very similar countries (I mean no offence to either :) ), the difference between good and bad performance is more often than not a question of money. In other words, France may have superior public services simply because it spends more money on them, compared to the UK. "Spending money" includes capital, operating and staff costs.

Government-bashing types may like to reduce the above statement to "throw enough sh1t against the wall and something's bound to stick", but I believe that it really is a matter of allocating the necessary resources to operate ANY system and/or organisation, public or private.

I certainly do not think that there is anything genetic about delivering good service, public or private. Find another excuse!

Allright, but passenger killing taxi driver being the sole example of poor services rendered, it is difficult to 'actualize' the causal connection from privatized services to abdication of responsibility to raise of anti-immigrant party.

I think it's overstatement to turn the guilt of one taxi driver into some kind of broader responsibility (or argument about lack thereof) of politicians. If the taxi drivers collectively have become a violent bunch relative to general population then there might be better case. Still, what has it got to do with ownership/regulation of some other outsourced service, if it's just the taxi drivers who are out of order..?

Loss of faith on democratic government is even more questionable proposition if the evidence offered is the very outcome of democratic process - Wilders gets votes. Were the Dutch immigration policies NOT enacted with 'public interest' in mind - as it was understood by politicians who voted for those laws? Is there anything deficient in part of public deciding those policies are not in their interests or that public interest should be different altogether and voting for someone they think will change policies? When privatization of services and market principles are connected to this, the article seems to be suggesting - those Wilders' voters are not voting to change immigration policies, what they really are after are those fat publicly owned and run services... Not the worst of slights, of course, but also not terribly charitable towards that trust in democratic governance.

Another great article denounced not so much by market ideology as by the world has to be judged by British Standards.

The core difference between Britain and the rest of Europe was that they had this dysfunctional Union structure. Britain instead of reforming their system decided to abolish it and replace it with anti Union anti Government market radicalism.

You agree with Wunala. DNA is not the difference. I suspect the amount spent matters more, and possibly as well the image public servants have of themselves and their importance in society.

This is a hard thing for a Frenchman with strongly (in French standard) liberal orientation, living in an Anglo-Saxon country (Australia): philosophically I would like to spend as little as possible in public services and government spending, yet when I compare the French vs. Australian models, I can't help thinking the French model has real merits, certainly more than the Economist would acknowledge.

Charlemagne summarises the article as "blaming everything on the markets", but there a bit more to it than that. The central point, as far as I understand it, it the abdication of responsibility of the political class, consisting in a failure to make - and stick to - decisions on important issues. This leads to a loss of faith in democratic government.

The articles explores some of the background to this abdication of responsibility. It turns out part of the problem is that government tasks have been outsourced or privatised without adequate democratic safeguards. The result is that, when things go wrong, politicians disclaim responsibility. Charlemagne makes a correct distinction between privatisation and regulation, but I'm not sure that the original article doesn't. The problem is partly that services have been outsourced to the market that are no better off, and partly that oversight has been poorly organised or carried out. In both cases, the result is the same, as citizens' complaints about poor delivery of state services are dismissed for being addressed to the wrong address: the state is no longer responsible.

You can agree or disagree with the analysis in the original piece - and perhaps Charlemagne's lack of experience of the Netherlands is a hindrance - but surely that analysis can only be cast aside as shoddily "blaming everything on the markets" if you are so wedded to the idea only markets can run government that you are part of the problem that the author describes.

Perhaps it all makes sense if you are still traumatised by the public service mess that was 1970's Britain. If you're not, it doesn't.

I do think there's a third way of looking at things. I wouldn't disagree that private companies conducting public affairs has grown substantially (my job being an example.) This conceals somewhat the growth of government and adds abrupt discontinuities to both political authority and the marketplace. Of course, if that trend exists as a problem, my preferred solution would be much more Reaganesque (or Thatcherite) than Chavannesian.

@PP: You're right - if the article based its entire argument on the taxi driver who beat a customer to death, it wouldn't be a very strong argument. But it doesn't: the incident is provided as an example not proof. Perhaps it doesn't resonate strongly as an example outside the Netherlands, where the incident was seized upon so widely precisely because it was symbolic of botched deregulation: taxis in Amsterdam were fine until the market was liberalised. Now, no local will take a taxi - especially at tourist hotspots such as the central station or the Leidseplein entertainment area where the fatal assault took place - unless they want to be cheated and abused.

In general, governments and publications like The Economist have championed the introduction of more market forces on the grounds that it will lead to greater competition and, as a result, better services and/or lower prices. The intellectual arguments remain strong. However, the Dutch taxi market is just one - poignant - example of a liberalisation that has obviously failed to produce any such improvements. I don't argue for a minute that the taxi market should be nationalised. However, free-market ideologues should be brave enough to admit the obvious -- that the benefits of market forces in the provision of public services have been oversold and that over-ambitious deregulation without adequate safeguards for public interests is bad policy that gives deregulation a bad name.

And therein lies the link between overhyped and ill-executed deregulation on the one hand and the rise of anti-establishment parties on the other. Government's failure to deliver on promises and inability to take responsibility for failures makes people less likely to trust government. It is too easy to say that Wilders's success at the polls can, by definition, not be adduced as evidence for the loss of faith in democracy. He is not just an anti-immigrant politician, but an 'anti' politician in a wider sense. He attracts voters precisely because he articulates broadly held criticism of weak governing elites who talk but don't deliver.

Allright, thanks, and thanks Wunala Dreaming. If the analysis is correct, I wonder what the 'outsourcing' of lawmaking and governance to EU means in it (why does it not figure in it)?

Take the area of immigration and asylum, for example. If Austria is any guide, no matter how the establishment tries to delegitimize his party, Mr. Wilders is likely to win the debate in principle (have between 60%-70% of public favoring more restrictive approach, and eventually force those in government to back and try to implement at least some changes) even while he is kept out of power and cannot influence every practical implication of more restrictive policies.

What will happen to trust in democratic governance when the public learns that EU (or ECJ) is an obstacle to having their parliaments and governments enact changes most of them would approve? There is some precedent already - ECJ striking down parts of Danish immigration rules (Metock case -http://en.wikipedia.org/wiki/Metock_case )

I would laugh out loud, if the situation was not so serious.
Between 1980 and about 2000 the Netherlands were plagued with integration problems. Labor migrants from rural areas of Morocco had children and there were the first signs of trouble. We had a racist called Hans Janmaat, who stated the obvious. He was silenced by the establishment and robbed of his human rights. When he wanted to meet with his political party, left-wing extremists burned down the hotel. At one occasion his wife was thrown out of the window and a leg had to be amputated. No-one was arrested, there was not even an attempt to arrest someone. Janmaat was bad, and had no rights. But he was the voice of a growing group of people living in poor neighborhoods.
Then we had Pim Fortuyn, a man with more charisma. Were Janmaat failed to attract people, Fortuyn succeeded and was then murdered by the same left-wing extremists. Then we got Geert Wilders.
The establishment likes to blame everything and anyone except themselves. They refused to debate the growing integration problems between 1980 and 2002.
One can say, that Janmaat, Fortuyn and Wilders discriminated and didn't / don't talk nice about foreign people. Put the problems they tried to bring to the attention were real.

After the murder on Pim Fortuyn we nearly had civil war.

At this moment we have a situation like Germany in 1932. Voters run away from the traditional parties and flee to extremists. On one hand, we have the Socialistic Party (a new breed of communists), on the other hand we have Geert Wilders. Wilders is extremely anti-Islamic, like Hitler was extremely anti-Semitic. I do not believe that Wilders is psychotic like Hitler, and the Netherlands is only a small country, unlike Germany. So we should not equal Hitler and Wilders.

There are two dangerous paths to the future:

1. Another left-wing extremist murders Wilders. In that case we will have civil war. Every person accused of left-wing extremism will have to run for his/her life.
2. In the next election the Socialist Party and Wilders will get so many votes, that it becomes impossible to form a government without both of them. In the most likely scenario, the Christian Democrats will support Wilders and make him prime-minister. Like the Christian Democrats in Germany 1933 supported Hitler.

In both scenarios the Netherlands is not a place to be. Not if you are a reasonable person. And certainly not if you are a Muslim.

Will I stay? In 2004 I moved to the extreme north-east of the Netherlands, at the German border. I plan emigration in the next two years.

My advise to Muslims: If you live elsewhere, do not go near the Netherlands. If you live in the Netherlands, plan your emigration.

My advise to foreign investors: Cut your losses, sell and leave. The establishment has ruined the country. The Netherlands is no longer a society. It is an aggregate of people looking for opportunities, without social cohesion. People in the Netherlands only laugh when another person goes down. That is an opportunity. You do not find this in newspapers. They are controlled by the establishment. But you do find it if you talk to the people.

About 10% of the dutch population is Muslim. What do you think will happen when Geert Wilders becomes prime-minister?

Why is the Netherlands ruined? Not by privatizing public services but by neglecting the problems with integration. The establishment simply forbade any discussion about the problems and allowed extreme violence of left-wing extremists towards any person suspected of any kind of discrimination.